U.S. Attorney Terrance Flynn who brought charges against Richard Piccoli

Buffalo, N.Y., Jan 9, 2009 / 05:44 pm (CNA).- An 82-year-old New York man has been charged with running a long-term Ponzi scheme targeted at Catholics, allegedly processing more than $16 million through a false mortgage company.

Clients of the scheme were told their investments went to “high quality residential mortgages” purchased “from bankers at a discount,” a Securities and Exchange Commission (SEC) complaint charges.

On Thursday morning a team of four agents from the U.S. Postal Service and the IRS took Richard S. Piccoli of Williamsville, New York to court, accusing him of using funds from his latest investors to pay off his first investors.

A postal inspector charged Piccoli with mail fraud, saying there was no evidence he bought any mortgages or did any investing at all, the Buffalo News reports. He allegedly paid out monthly interest to his clients, transferring about $600,000 to his personal accounts or to his children.

The SEC in a civil complaint also charged Piccoli and his business Gen-See Capital Corp. with a number of federal offenses. The Commission accused him of selling unregistered securities and is seeking an immediate freeze on his bank accounts, the Buffalo News reports.

“For at least the past decade, Defendants have engaged in a fraudulent Ponzi scheme primarily targeting the elderly and members of the Catholic community,” the SEC complaint reads.

“Unlike the Ups and Downs of the stock market, Gen-See investors earn 7.1 % Annual Interest ... guaranteed no interest fluctuation," one ad read, according to the SEC.

“[O]ur seniors and clergy are absolutely pleased with Gen-See's Re-Investment Program,” marketing materials for the alleged scam read. The materials highlight the program’s lack of fees or commissions and investors’ ability to draw a monthly check at any time with 30 days notice.

The program also promised a “significant return on capital.”

Piccoli’s clients included 50 priests in addition to churches, religious orders, and cemetery associations. He reportedly advertised in Catholic newspapers from Buffalo, New York to Anchorage, Alaska and sought clients among his fellow Knights of Columbus.

“He was very Catholic and very pro-church,” said one area priest who invested more than $50,000 in retirement savings with Gen-See told the Buffalo News. “I trusted him, and I thought, ‘Well it’s worth a risk.’”

The Western New York Catholic, the newspaper for the Diocese of Buffalo, ran some of Piccoli’s advertisements.

Kevin Keenan, a spokesman for the diocese, told CNA that no diocesan funds were invested with Piccoli.

Keenan said Piccoli had run his ads in the Western New York Catholic, but no customers had complained to the paper. He added it would be unfortunate should Piccoli be proven to have used the newspaper to find customers to defraud.

“It’s a quality newspaper, and we pride ourselves on having quality advertisers,” he said to the Buffalo News.

When CNA contacted Keenan on Friday, he said that he had conversed with Piccoli’s “shocked” clients.

“They trusted him and in some cases he was close friends with these investors, they certainly feel that that trust has been violated and they think he took advantage of their friendship,” he said.

Keenan reiterated that no money from Buffalo’s diocesan foundation was involved in the investments.

“A couple of our parishes had invested with him,” he explained, adding that “several” active and retired priests had also been victimized by the alleged Ponzi scheme.

However, the extent of their financial losses is still unknown, Keenan told CNA.

According to the Buffalo News, the SEC complaint seems to indicate that no one has yet lost any money, stating that, since January 2007, Piccoli and Gen-See Capital Corp. received more than $16 million and paid out “approximately the same amount.”

U.S. Magistrate Judge Jeremiah J. McCarthy released Piccoli without bail, until his arraignment on Tuesday. Piccoli said he intended to hire a lawyer.

Postal inspectors and the SEC reportedly want to hear from Piccoli’s investors in the hope of returning remaining funds.

“We want to talk to as many investors as possible to further investigate the case and, hopefully, to try and help them get their money back,” Williams said.